Last week, I caught a BitPay Fireside Chat and had a chance this week to view the accompanying Forrester Research commissioned by Bitpay titled “The Total Economic Impact™ Of Accepting Bitcoin Using Bitpay.” BitPay is uniquely positioned to document the impact for merchants as they are currently processing $1 Billion in blockchain payments annually. I was curious about the topic for obvious reasons since most bitcoin and crypto holders I talk to are investors/savers, and not necessarily looking to spend their hard earned crypto.
Central to the methodology, Forrester reviewed the transaction data of four merchants. The upshot of the report is that if you’re thinking of accepting crypto as payment for goods or services, it's probably a smart move for finding new customers, increasing basket size, and procuring bigger spenders for your products. What jumped out at me immediately from the research was that crypto spenders on average spend $450 more than typical customers using traditional card payments, and they go out of their way to find businesses that accept crypto payments.
Not surprisingly, bitcoin was the dominant crypto used by a large margin of the overall transactions across the merchants, however, there was interest and use with other cryptocurrencies as well. The range per transaction was between $100 - $5,000 which is more good news for merchants since on average they also save 1.25% in transaction fees. Bigger spend and less fees what’s not to like? Merchants are also shielded from those pesky charge backs since crypto is actually a push payment as opposed to a pull, so all sales are final.
There are also some very big spenders as in: “can I buy that yacht with my bitcoin?”
One of the featured guests was Bob Denison, founder of Denison Yachting who to date has done 14 transactions all in bitcoin. Also these bitcoin yacht buyers seem to be easier and faster to deal with in the whole transaction process. According to Bob, normal transaction time for a new yacht is 45 days where bitcoin yacht transactions are as much as 30% to 40% faster. If you're looking for high net wealth customers for your luxury goods and services, then you should seriously consider accepting crypto. According to BitPay, 32% of their total transaction processing volume year-to-date is luxury goods (cars, boats, jewelry, etc) which explains the annual $1B milestone.
There’s a reason higher ticket items are more often purchased by crypto holders according to the report: nearly half of the transactions were by customers with crypto holdings of $50,000 or more. Other popular items high on the purchased list, with over 50% making purchases in the last year, included food, gaming, and computer electronics. Apparel and travel came in just below 50%. It will be interesting to see how that changes over the next few years as demographics evolve among crypto holders, and transactions become more mainstream with wider adoption by merchants, facilitating crypto use for goods and services.
Currently in the U.S. and UK where the research was conducted, it is still a crypto boys club with fully 68% of the transactions being conducted by men between the ages of 25-54. But we do see signs of the demographic changing with 30% being female and another 30% keeping their crypto in non-custodial means such as cold wallets. The non-custodial holders in my view represent more of a conservative holder of cryptocurrency who is in it for longer term investment opportunities.
Invoking Geoffrey Moore here, we’ve only begun to cross the chasm. On average, at this point in time, merchants may only see 2-4% of their sales transactions in crypto. This is the point that always makes me snicker when I talk to people who think it is too late to get into crypto currency: there’s a market of 96%+ of crypto transactions yet to be conducted. While one of the biggest crypto payment processors has an annual volume of $1 billion in transactions, we are still very much in the early days of the crypto economy.
All the best,
Jim